Physical Presence Test

/Physical Presence Test
Physical Presence Test2019-01-18T20:16:21+00:00

To meet the Physical Presence Test, you must be physically present in a foreign country for 330 full days during a period of 12 consecutive months. What does this mean? The IRS considers a travel day as a day IN the US – which means you, have 34 days to be traveling to, from, and in the US. The IRS defines a full day as a 24 hr period beginning at midnight. Time you spend flying over foreign water or a foreign country is not considered physically present in a foreign country, thus, these travel days count against you.

The term “foreign country” does not include U.S. possessions such as Puerto Rico, Guam, and the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa. For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, the terms “foreign,” “abroad,” and “overseas” refer to areas outside the United States, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico, the U.S. Virgin Islands, and the Antarctic region. The term “foreign country” does not include ships and aircraft traveling in or above international waters, nor does it include offshore installations which are located outside the territorial waters of any individual nation.

You can count days you spent abroad for any reason. You do not have to be in a foreign country only for employment purposes. You can be on vacation time. You do not meet the physical presence test if illness, family problems, a vacation, or your employer’s orders cause you to be present for less than the required amount of time.

However, the minimum time requirement can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions, and that you had a tax home in the foreign country and were a bona fide resident of, or physically present in, the foreign country on or before the beginning date of the waiver.

This qualification is the most difficult to meet, but offers the greatest flexibility and simplicity in taking the foreign income exclusion.

Make sure you track your travel to the day. Should an Audit arise, the burden of proof will be on you to show documentation that you were physically present in a foreign country for 330 full days. Please note that, unlike Bona Fide Residence, meeting the federal Physical Presence requirements will not necessarily exempt you from paying state income tax.